How to Remove Uncollectible Accounts Receivable
Regardless of your accounting method or program, whether you're using QuickBooks 2012 or some other program, you will have to clean up your records. If you do set up an allowance for uncollectible accounts, you also need to periodically remove the uncollectible accounts from both the accounts receivable balance and the allowance for uncollectible accounts.
You don’t want to do this while any chance exists to collect on the accounts. But at some point, obviously, you may as well clean out the bad receivables from your records. It makes no sense, for example, to have uncollectible receivables from 17 years ago still appearing on your balance sheet.
|Allowance for uncollectible||100|
This journal entry debits the allowance from the uncollectible A/R account for $100. The journal entry also credits the accounts receivable account for $100. In combination, these two entries zero out the allowance for the uncollectible A/R account and remove the uncollectible amount from the accounts receivable account.
Writing off an actual, specific uncollectible receivable for invoice should be done on a case-by-case basis. This is what Journal Entry 4 shows.
None of these entries is particularly tricky as long as you understand the logic. If you do have trouble with these journal entries or with recording the economic events that they attempt to summarize, you may want to consult your CPA.
Most likely, you would record these same transactions (of course, with different customers and amounts) many, many times over the year. If you can get a bit of help or a template that shows you how to record these transactions, you should be able to record them yourself without any outside help.
To write off an uncollectible account receivable, you record a credit memo and then apply the credit memo to the uncollectible account. The item shown on your credit memo should cause the allowance for uncollectible accounts to be debited.